Shell acts to reinforce business resilience and financial strength
The Hague, March 23, 2020 - As the COVID-19
virus spreads across the world - seriously impacting people’s
health, our way of life and global markets - Shell is putting the
safety and health of our people and customers first, along with the
safe operations of all our businesses.
At the same time, we are taking decisive action to reinforce the
financial strength and resilience of our business so that we are
well-positioned for the eventual economic recovery.
“As well as protecting our staff and customers in this difficult
time, we are also taking immediate steps to ensure the financial
strength and resilience of our business,” said Ben van Beurden,
Chief Executive Officer of Royal Dutch Shell. “The combination of
steeply falling oil demand and rapidly increasing supply may be
unique, but Shell has weathered market volatility many times in the
past.”
“In these very tough conditions, I am very proud of our staff
and contractors across the world for maintaining their focus on
safe and reliable operations while also ensuring their own health
and welfare and that of their families, communities and our
customers.”
In order to deliver sustainable cash flow generation, Shell is
actively managing all our operational and financial levers – from
focusing on maintaining safe and reliable operations each day to
reducing capital spend and operating expenses.
Today, we are announcing that we have embarked on a series of
operational and financial initiatives that are expected to result
in:
- reduction of underlying operating costs by $3-4 billion per
annum over the next 12 months compared to 2019 levels;
- reduction of cash capital expenditure to $20 billion or below
for 2020 from a planned level of around $25 billion; and
- material reductions in working capital.
Together, these initiatives are expected to contribute $8 - 9
billion of free cash flow on a pre-tax basis. Shell is still
committed to its divestment programme of more than $10 billion of
assets in 2019-20 but timing depends on market conditions.
The Board of Royal Dutch Shell has decided not to continue with
the next tranche of the share buyback programme following the
completion of the current share buyback tranche.
We will continue to review the dynamically evolving business
environment and are prepared to take further strategic decisions
and consider changes to the overall financial framework as
necessary.
In the current environment, Shell’s financial resilience is
fundamental to continued investment in our strategic priorities.
Shell seeks to maintain strong financial credit metrics and ensure
it has a robust balance sheet to manage volatility. Shell’s
liquidity remains strong, with around $20 billion in cash and cash
equivalents, $10 billion of undrawn credit lines under our
revolving credit facility and access to our extensive commercial
paper programmes.
Read about Shell’s global response to COVID-19 at
https://www.shell.com/covid19.html
Shell will publish its next quarterly update note on 31 March
2020 and release its Q1 2020 results on 30 April 2020.
Notes to editor
- Divestments of around $5 billion of assets were completed in
2019
- Current share buyback tranche refers to the $1 billion share
buybacks announced on 30 January 2020
- Shell is rated AA- with negative outlook by S&P and Aa2
with stable outlook by Moody’s
Royal Dutch Shell plc
Enquiries:
Investor Relations: Europe + 31 (0) 70 377 4540
North America +1 832 337 2034
Media: International +44 (0) 207 934 5550
Americas +1 832 337 4355
Cautionary NoteThe companies in which Royal
Dutch Shell plc directly and indirectly owns investments are
separate legal entities. In this announcement “Shell”, “Shell
Group” and “Royal Dutch Shell” are sometimes used for convenience
where references are made to Royal Dutch Shell plc and its
subsidiaries in general. Likewise, the words “we”, “us” and “our”
are also used to refer to Royal Dutch Shell plc and its
subsidiaries in general or to those who work for them. These terms
are also used where no useful purpose is served by identifying the
particular entity or entities. ‘‘Subsidiaries’’, “Shell
subsidiaries” and “Shell companies” as used in this announcement
refer to entities over which Royal Dutch Shell plc either directly
or indirectly has control. Entities and unincorporated arrangements
over which Shell has joint control are generally referred to as
“joint ventures” and “joint operations”, respectively.
Entities over which Shell has significant influence but neither
control nor joint control are referred to as “associates”. The term
“Shell interest” is used for convenience to indicate the direct
and/or indirect ownership interest held by Shell in an entity or
unincorporated joint arrangement, after exclusion of all
third-party interest.
This announcement contains forward-looking statements (within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995) concerning the financial condition, results of operations and
businesses of Royal Dutch Shell. All statements other than
statements of historical fact are, or may be deemed to be,
forward-looking statements. Forward-looking statements are
statements of future expectations that are based on management’s
current expectations and assumptions and involve known and unknown
risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or
implied in these statements. Forward-looking statements include,
among other things, statements concerning the potential exposure of
Royal Dutch Shell to market risks and statements expressing
management’s expectations, beliefs, estimates, forecasts,
projections and assumptions. These forward-looking statements are
identified by their use of terms and phrases such as “aim”,
“ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’,
‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’,
‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’,
“schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar
terms and phrases. There are a number of factors that could affect
the future operations of Royal Dutch Shell and could cause those
results to differ materially from those expressed in the
forward-looking statements included in this announcement, including
(without limitation): (a) price fluctuations in crude oil and
natural gas; (b) changes in demand for Shell’s products; (c)
currency fluctuations; (d) drilling and production results; (e)
reserves estimates; (f) loss of market share and industry
competition; (g) environmental and physical risks; (h) risks
associated with the identification of suitable potential
acquisition properties and targets, and successful negotiation and
completion of such transactions; (i) the risk of doing business in
developing countries and countries subject to international
sanctions; (j) legislative, fiscal and regulatory developments
including regulatory measures addressing climate change; (k)
economic and financial market conditions in various countries and
regions; (l) political risks, including the risks of expropriation
and renegotiation of the terms of contracts with governmental
entities, delays or advancements in the approval of projects and
delays in the reimbursement for shared costs; (m) risks associated
with the impact of pandemics, such as the COVID-19 (coronavirus)
outbreak, and (n) changes in trading conditions. No assurance is
provided that future dividend payments will match or exceed
previous dividend payments. All forward-looking statements
contained in this announcement are expressly qualified in their
entirety by the cautionary statements contained or referred to in
this section. Readers should not place undue reliance on
forward-looking statements. Additional risk factors that may affect
future results are contained in Royal Dutch Shell’s Form 20-F for
the year ended December 31, 2019 (available at
www.shell.com/investor and www.sec.gov). These risk factors also
expressly qualify all forward-looking statements contained in this
announcement and should be considered by the reader. Each
forward-looking statement speaks only as of the date of this
announcement, 23 March 2020. Neither Royal Dutch Shell plc nor any
of its subsidiaries undertake any obligation to publicly update or
revise any forward-looking statement as a result of new
information, future events or other information. In light of these
risks, results could differ materially from those stated, implied
or inferred from the forward-looking statements contained in this
announcement.
This announcement may contain references to Shell’s website.
These references are for the readers’ convenience only. Shell is
not incorporating by reference any information posted on
www.shell.com.
We may have used certain terms, such as resources, in this
announcement that the United States Securities and Exchange
Commission (SEC) strictly prohibits us from including in our
filings with the SEC. Investors are urged to consider closely
the disclosure in our Form 20-F, File No 1-32575, available on the
SEC website www.sec.gov.
LEI number of Royal Dutch Shell plc:
21380068P1DRHMJ8KU70Classification: Additional regulated
information required to be disclosed under the laws of a Member
State